European Financial and Accounting Journal 2019, 14(3):05-24 | DOI: 10.18267/j.efaj.228

Exchange Rate Modeling under Unconventional Monetary Policy on a European Panel Sample

Gábor Dávid Kiss, Mercédesz Mészáros
University of Szeged, Faculty of Economics and Business Administration; University of Szeged, Faculty of Economics and Business Administration

Following the latest subprime crisis, central banks introduced several unconventional instruments which had spillover effects on foreign exchange rates. The aim of our paper is to explore whether the use of zero lower bound (ZLB) and unconventional instruments has an impact on the changes in foreign exchange rates. By running dynamic panel regressions, we analysed this issue on a sample of 7 European central banks.
Based on our results, unconventional monetary policy had a significant impact on the exchange rate fluctuations in the short term, even with the use of instruments where there was no targeted exchange rate regulation.

Keywords: Interest Rate Parity; Unconventional Monetary Policy; Panel Regression
JEL classification: C33, E43, E52, E58

Received: August 31, 2019; Revised: January 4, 2020; Accepted: January 7, 2020; Prepublished online: January 31, 2020; Published: December 31, 2019  Show citation

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Kiss, G.D., & Mészáros, M. (2019). Exchange Rate Modeling under Unconventional Monetary Policy on a European Panel Sample. European Financial and Accounting Journal, 14(3), 05-24. doi: 10.18267/j.efaj.228
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